Q: We own one house in the District that we have been renting out for a number of years. We now plan to sell this house, but are very confused about the legal requirements to give our tenants the first right of purchase. What are these rights, and how much time do they have?
A: It has often baffled me why landlords sometimes worry about selling their property to their tenants. Regardless of how the tenant has treated you or your property, does it really make a difference whether you sell to the tenant or to an outsider--so long as you get your price and the settlement date is not unnecessarily delayed?
Thus, landlords contemplating selling property should approach their tenants with an offer, in writing, indicating that the property will be sold, and that the tenant has an opportunity to purchase at the asking price. Of course, the price must be a "bona fide offer," which means that it must be at the same price as being offered to the general public.
Under the Tenant Opportunity to Purchase Act, the written offer of sale must contain certain other information, too. For instance, you must state whether you already have a signed sales contract with a "third party" and you must offer to provide monthly operating costs, upon request. You can obtain a sample copy of an offer of sale from the D.C. Department of Housing (535-1525).
Tenants must be given at least 60 days in which to enter into a contract with the landlord for the purchase of the property. The owner is required to negotiate all terms in good faith.
Keep in mind the fact that if you enter into a contract with your tenant, your earnest money deposit can be no more than 5 percent of the sales price. This deposit must be refundable to the tenant in the event of any "good faith" failure of the tenant to perform under the contract. Any settlement must take place no less than 60 days after the date of the purchase contract--unless the tenant wants an earlier settlement date.
In addition, if you receive a valid sales contract from a third party, the tenants have an additional 15 days "right of first refusal" to match that contract. Thus, there is a 60-day opportunity to contract, plus an additional 15-day period in which the tenant has to exercise the refusal right.
If the tenants do not want to buy, you should have them give you a letter specifically waiving their right to purchase. To be safe, the waiver should not be granted until after the tenants have received the written offer of sale.
Once they have waived their rights, you have complete freedom to offer the property to outsiders, so long as the offering price is comparable to that which was offered the tenant.
However, if you still have not sold or signed a sales contract for your house after six months following the original offer to your tenants, and if you continue to offer the property to the public, you are required to give your tenant another first right of purchase.
This is not really as complicated as it sounds. In the final analysis, offer the property to your tenants first, and if they don't want to purchase, try to get them to sign the written waiver of their rights.
Can you evict the tenants if they do not want to purchase the property? Yes, but only if you have signed a contract with persons who intend to move into the house themselves. The tenant must be given 90-days notice from the date that you have signed the contract to sell.